precious metal —

Lithium giants feud over competition, brine in Chile’s Atacama Desert

Albemarle and SQM can't settle water disputes, and a sale might draw them closer.

Enlarge/ A general view of Laguna Colorada located near the border with Chile, in the Uyuni Salt Flats, Bolivia. The Uyuni Salt Flats are estimated to contain 100 million tons of lithium, making it one of the largest global reserves of this mineral, according to state officials at the Bolivian Mining Corporation.

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Two of the world's biggest lithium producers, Albemarle Corporation and Sociedad Quimica y Minera de Chile (otherwise known as SQM), are tangled in two disputes: the first over water rights in Chile's Atacama desert and the second over ownership of SQM.

Both Albemarle and SQM have significant operations in the Atacama desert, where some of the world's best lithium resources exist. As electric vehicles with lithium-ion batteries become more popular, lithium resources are becoming more valuable. That has created some conflict in an industry that has long remained relatively quiet.

Who's drinking whose milkshake?

This week, Reuters reported that both Albemarle and SQM have accused each other of overdrawing brine from the Atacama's underground aquifers. Both companies have operations in the Atacama's Salar, and their operations are just three miles apart from each other. The brine water that has been accumulating for millennia under the Atacama is lithium-rich, and companies pump it out and send the brine to evaporation ponds where heat extracts the water and leaves the reactive alkali metal behind.

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Both companies have said publicly that they expect to have enough brine to be able to produce lithium for decades, but Reuters found filings with the Chilean government that express doubt about the longevity of the resource that Albemarle and SQM share.

In several filings, Albemarle requested that the Chilean government follow up on a 2016 study that found that SQM had overdrawn from the brine reserve between 2013 and 2015. Chile's environmental regulator says that, due to changes that SQM has made over the last several years to how it extracts brine, it's hard to tell how much brine it has actually pumped.

SQM, for its part, also accuses Albemarle of overdrawing its share of brine in 2008 and between 2010 and 2012. Reuters reports that neither the Chilean government nor the companies themselves seem to have a clear understanding of how much brine exists for extraction.

The accusations seem to stem from a routine government inspection in 2013, when regulators found that the native Algarrobo trees on SQM's property were dying. That suggested that the trees, which send roots into the Salar's aquifers to survive, weren't getting enough water. "Two years later, more trees were dying, but SQM failed to notify authorities, according to government inspection reports," Reuters noted.

In March, a Chilean government report found that more brine was being extracted from the Salar than was coming back in through rainfall and snowmelt. However, the office couldn't tell whether it was SQM or Albemarle that was withdrawing more water. To deal with this, Chile’s water regulator is expected to place restrictions on new water rights in the Salar.

An owner with two teams

The rivalry doesn't stop at water between Albemarle and SQM; it appears that the ownership of the companies is also a source of dispute.

The Wall Street Journal writes that Canadian mining company Nutrien owns a 24-percent stake in SQM, which it would like to sell to Chinese firm Tianqi Lithium Corp. for $4.1 billion. But Tianqi partners with Albemarle to operate a large lithium mine in Australia. This has left SQM shareholders worried that Tianqi might share industry secrets with Albemarle.

Chile's competition regulator has approved the deal, as long as Tianqi nominates directors to SQM's board that are not direct employees and as long as Tianqi-nominated directors don't share any commercially sensitive information. But SQM's largest shareholder, Julio Ponce Lerou (who, the WSJ writes, is also "the son-in-law of the late Chilean dictator Augusto Pinochet"), challenged Chile's approval of the Nutrien-Tianqi deal in court.

"Mr. Lerou has argued a Tianqi-SQM combination could result in the leaking of SQM trade secrets to Tianqi partner and SQM rival Albemarle," the WSJ writes. "Outside critics say the deal also could create an OPEC-like lithium cartel that might be able to influence pricing and access to the metal at a time when demand is soaring."

A court hearing is set for October 22, and the results will determine whether the Nutrien-Tianqi deal will close in 2018 or will remain in perpetual limbo.

Where are the trees located? I googled around for pictures of the sites themselves, and they are in the middle of salt pans that have nothing growing on them at all. I'm assuming the drawdowns are affecting the aquifer as a whole, but I don't have a sense of scale in terms of how far away from the extraction the water table problem has been seen.

Where are the trees located? I googled around for pictures of the sites themselves, and they are in the middle of salt pans that have nothing growing on them at all. I'm assuming the drawdowns are affecting the aquifer as a whole, but I don't have a sense of scale in terms of how far away from the extraction the water table problem has been seen.

The brine water that has been accumulating for millennia under the Atacama is lithium-rich, and companies pump it out and send the brine to evaporation ponds where heat extracts the water and leaves the reactive alkali metal behind.

It strikes me that evaporation ponds in the desert are the exact wrong way to treat precious water reserves. Surely, some method of precipitating-out or sieving-out the lithium must exist (even if more expensive), allowing the precious water to be re-injected or such. (Perhaps, regulations need to be passed which apply to any and all extractors?)

The brine water that has been accumulating for millennia under the Atacama is lithium-rich, and companies pump it out and send the brine to evaporation ponds where heat extracts the water and leaves the reactive alkali metal behind.

It strikes me that evaporation ponds in the desert are the exact wrong way to treat precious water reserves. Surely, some method of precipitating-out or sieving-out the lithium must exist (even if more expensive), allowing the precious water to be re-injected or such. (Perhaps, regulations need to be passed which apply to any and all extractors?)

Chinese locking up basic resources in Chile and Australia? Good long term strategic thinking for them. Can't be anything but bad for the rest of the world.

Chilean here. Strategic thinking about our natural resources appears to be non existent, no matter the political faction in power. Just sell the stuff, they pay the bills.

They're not so bad compared to the rest of South America. Probably the best decision was to make the national company compete, and they did set up a sovereign wealth fund to shield from commodity fluctuations. I mean, I'm sure there is a lot more they can do, but they're doing quite well for where they are.

It strikes me that evaporation ponds in the desert are the exact wrong way to treat precious water reserves. Surely, some method of precipitating-out or sieving-out the lithium must exist (even if more expensive), allowing the precious water to be re-injected or such. (Perhaps, regulations need to be passed which apply to any and all extractors?)

Most brine will be evaporated down as far as they can by solar evaporation to reduce the amount of water the treatment plant has to deal with. Treatment usually consists of evaporation, then reverse osmosis to recover even higher concentrations of lithium. You try to reject the water, salt and magnesium. Treating less water means less cost pumping and higher initial Li concentrations. The waste water is usually re-injected into barren areas to help push more lithium-rich brine towards your production wells.

But brine / aquifer lithium deposits are some of the hardest mineral deposits to pin down from a resource/reserve point of view - its very hard to track who's pumping what, and how fast, especially when more than one company is pumping from the same source. And where and how much brine remains. Hence the milkshake - two companies, one cup.

But brine / aquifer lithium deposits are some of the hardest mineral deposits to pin down from a resource/reserve point of view - its very hard to track who's pumping what, and how fast, especially when more than one company is pumping from the same source. And where and how much brine remains. Hence the milkshake - two companies, one cup.

It strikes me that evaporation ponds in the desert are the exact wrong way to treat precious water reserves. Surely, some method of precipitating-out or sieving-out the lithium must exist (even if more expensive), allowing the precious water to be re-injected or such. (Perhaps, regulations need to be passed which apply to any and all extractors?)

Most brine will be evaporated down as far as they can by solar evaporation to reduce the amount of water the treatment plant has to deal with. Treatment usually consists of evaporation, then reverse osmosis to recover even higher concentrations of lithium. You try to reject the water, salt and magnesium. Treating less water means less cost pumping and higher initial Li concentrations. The waste water is usually re-injected into barren areas to help push more lithium-rich brine towards your production wells.

But brine / aquifer lithium deposits are some of the hardest mineral deposits to pin down from a resource/reserve point of view - its very hard to track who's pumping what, and how fast, especially when more than one company is pumping from the same source. And where and how much brine remains. Hence the milkshake - two companies, one cup.

Not sure on the reverse osmosis part. RO becomes extremely energy intensive as brine concentration increases. If they are near saturation, probably easiest to just keep evaporating, or introduce some chemicals to induce precipitation.

Reactive lithium metal does not enter the extraction and mining process at all, although I must admit to a secret desire to have a good vantage point to watch the spectacle if it did. A blast shield and a lot of halon would be a good back-up plan.

Chinese locking up basic resources in Chile and Australia? Good long term strategic thinking for them. Can't be anything but bad for the rest of the world.

It's like that Top Gear Africa special (the later one), in which they drive through Tanzania on perfect chinese roads they got "in exchange for some oil deal". That bit always worried me and sounded very ominous. That is the kind of long term planning everyone should be doing, but it feels like everyone but the chinede is just interested in ... say the coming 6 months or the next election when those happen. The bext quarters financials.

Canadian mining company Nutrien owns a 24 percent stake in SQM, which it would like to sell to Chinese firm Tianqi Lithium Corp. for $4.1 billion.

Why are they selling ownership in lithium mining companies right now? Is Nutrien in financial distress?

My guess would be because they acquired the stake when lithium wasn't as in demand as it is now, saw the share price go up and the CEO of Nutrien want to make a nice short term profit.

Nutrien is actually primarily a fertilizer & related agriculture products company, and is really only a mining company via potash & phosphorous mining by one of the two companies that merged to form it, the formerly provincial crown corporation PotashCorp.

I don't know when they came into ownership of this stake but likely it was part of a takeover of a junior mining company that also had (solution based?) potash mines or phosphorous mines. Makes total sense to spin it out for cash.